OS X uses massive VM, entire system hangs

It's very unlikely that VM use is your problem. It's not clear to me why your VM sizes are so large, but it shouldn't really have any effect on things (you're not getting any pageouts).

Does it lag long enough to trigger the spinning beachball cursor? If so there's an application called Spin Control that comes with Xcode that will automatically gather data on beachballing apps. The information from it could be useful.

 

I would have a look at Google notifier.
Although it doesn't seem to use any cpu, it actually can be the cause of system lag.

 

Screen capture, needing nearly a GB??
Seems like the VM figures are inflated across the board, whether the app would use something like these amounts or not

 

Don't worry about it. My system has 46.53GBs listed in activity monitor.

This is just theoretical maximums, not what the system is actually using. The number you need to pay attention too is Real Memory. You can safely ignore virtual memory.